2016 Business Equipment Quota Index

A market quota index for monochrome and color MFPs, monochrome and color single-function laser printers, and large-format printers.

NINTH EDITION

Copyright 2016, Business Technology Association, All rights reserved.

Business Technology Association 12411 Wornall Road, Kansas City, MO 64145 Tel: (816) 941-3100 • Fax: (816) 941-2829 • Web: www.bta.org

2016 BEQI | Introduction & How-to-Use Guide Copyright 2016, Business Technology Association, All rights reserved.

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2016 BEQI | What’s Inside

Introduction

4

Methodology

5

Sales Channels and Managed Print Services

7

IDC Product Placement Forecasts (2015-18)

9

Geographical Definitions

10

How to Use BEQI

11

2016 BEQI Introduction & How-to-Use Guide Copyright 2016, Business Technology Association, All rights reserved.

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2016 BEQI | Introduction

his ninth edition of the Business Technology Association’s Business Equipment Quota Index (BEQI) provides comprehensive market potential indices for the major business equipment industry categories. Exclusively covering all U.S. sales territories including state, metropolitan, county and ZIP code levels, this guide enables manufacturers, dealers, wholesalers and distributors to make informed marketing decisions. To meet the need of various BEQI users, BTA reports the following categories of office equipment. •

Monochrome multifunction printers o Total o Four speed classes defined by pages per minute

•

Color multifunction printers o Total o Four speed classes defined by pages per minute

•

Single purpose monochrome printers o Total o Four speed classes defined by pages per minute

•

Single purpose color printers o Total o Four speed classes defined by pages per minute

•

Large format printers

The speed classes are 1-20 ppm, 21-30 ppm, 31-69 ppm and 70 or higher ppm. For each category, BEQI indices are provided for 2015 (actual purchases) and planned purchases for 2016 and 2017.

2016 BEQI Introduction & How-to-Use Guide Copyright 2016, Business Technology Association, All rights reserved.

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2016 BEQI | Methodology

Methodology As with previous editions, the 2016 BEQI makes it possible to compare the volume of business equipment sales in different geographical areas (states, metropolitan areas, counties and ZIP codes). Each geographical area has 51 BEQI index numbers corresponding to the 17 types of multifunction devices, printers and large-format printers for 2015, 2016 and 2017. Each BEQI index number represents the area’s share of total U.S. shipments of that type of equipment for that particular year. It takes into account the geographical area’s industry profile and controls for variations in the amount of equipment purchased per employee in different sizes of companies and different industries. All results are reported in terms of geographic (not industry) level. Each BEQI index number is based on two data sources: 1. Census Bureau data showing the number of employees by industry in each geographical area. 2. Survey: 1,225 decision-makers completed the non-government survey concerning amounts of equipment purchased in 2015, and planned for 2016 and 2017. Respondents took part in a Web-based survey (stratified by 13 industries) conducted in February 2016 by Crain Associates Research LLC, a marketing research and consulting firm located in New Jersey. Respondents were screened to verify that they were involved in business equipment purchasing decisions, and that they were employed by nongovernmental organizations with at least 10 employees.

3. Data processing: As in past years, the survey was carefully cleaned to remove illogical data and address missing information. To derive the BEQI indices, ratios of equipment purchases per employee were computed at the industry level and then applied to the distribution of employment by industry at each geographic level.

2016 BEQI Introduction & How-to-Use Guide Copyright 2016, Business Technology Association, All rights reserved.

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2016 BEQI | Methodology

Handling of Equipment Purchases by Large Employers The 2016 survey includes companies ranging from one to 16,000 distinct business locations. The average number of locations is 1; the median number of locations is 3. The purchasing behavior of large organizations was a source of much discussion in the creation of earlier waves of this model. We know that master purchasing agreements are signed at corporate or division HQ levels, but the equipment may not be delivered there. After experimenting with different approaches to allocating corporate purchases in 2013, the decision was made to let the distribution of employees drive the allocation. In 2016, we have replicated the 2013 model specifications for ease of comparison and use of the model.

2016 BEQI Introduction & How-to-Use Guide Copyright 2016, Business Technology Association, All rights reserved.

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2016 BEQI | Sales Channels

Sales Channels

Both the 2016 and 2013 BEQIs include questions on spending by sales channels, allowing comparisons between these years.

The 2016 survey shows a slight reduction in spending with dealers/distributors. The proportion of dollars spent with this channel has fallen from 28.6% to 22.8%. This is offset by slight increases in spending with retailers, VARs and “other.” Despite a lot of noise, spending on the Internet for these products has remained largely flat.

Channel

Average proportion of spending with each channel 2016 (1225)

2013 (1083)

Retailer

23.3%

21.9%

Dealer distributor

22.8%

28.6%

Manufacturer

22.5%

22.7%

Internet

16.2%

13.2%

VAR

9.5%

8.0%

Other

5.7%

2.0%

2016 BEQI Introduction & How-to-Use Guide Copyright 2016, Business Technology Association, All rights reserved.

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2016 BEQI | Managed Print Services

Managed Print Services

Both the 2016 and 2013 BEQI surveys included questions about Managed Print Service (MPS) contracts. Under these agreements, vendors manage and/or provide service and supplies to all (or essentially all) copier/MFPs and printers at a customer location regardless of brand. They may also supply new printers at the start or during the contract period.

The most remarkable change between 2013 and 2016 is the sharp decline in the proportion of respondents saying they are unsure about the need for a managed services agreement. The “not sure” percentage has dropped from 10% to 2% in three years, while there are upticks in the proportion of companies that have contracts and in the proportion that are currently considering managed services.

Analyst comment: It’s reasonable to expect the incidence of contracts to reach 44% by the time this survey is conducted next.

Statements about Managed Print Services We have a Managed Print Services contract A Managed Print Services contract is planned or under consideration We would consider a Managed Print Services contract and would like more information We do not need a Managed Print Services contract Not sure N

Percent of companies reporting 2016 2013 38%

34%

21%

15%

22%

20%

18%

21%

2% 1225

10% 1200

Opposition to these contracts is shrinking. The proportion that says they either don’t need or are not sure if they need managed print services has dropped from 31% in 2013 to 20% in 2016.

2016 BEQI Introduction & How-to-Use Guide Copyright 2016, Business Technology Association, All rights reserved.

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2016 BEQI | IDC Product Placement Forecast

IDC Equipment Forecast

Market research firm IDC reports the 2015 actual product unit placements in the U.S. market and forecasts the 2016 through 2018 product placements as follows:

IDC data

Actual 2015

Mono Laser MFPs Total Mono Laser MFP 1-20ppm Mono Laser MFP 21-30ppm Mono Laser MFP 31-69ppm Mono Laser MFP 70+ppm Color Laser MFPs Total Color Laser MFP 1-20ppm Color Laser MFP 21-30ppm Color Laser MFP 31-69ppm Color Laser MFP 70+ppm Color Laser & Monochrome Laser MFPs Total Color Laser Printers Total Color Laser Printer 1-20ppm Color Laser Printer 21-30ppm Color Laser Printer 31-69ppm Color Laser Printer 70+ppm Monochrome Laser Printer Total Monochrome Laser Printer 1-20ppm Monochrome Laser Printer 21-30ppm Monochrome Laser Printer 31-69ppm Monochrome Laser Printer 70+ppm Large Format (inkjet and Laser)

2016

Forecast 2017

2018

CAGR

1,754,745 1,649,656 1,560,470 1,478,250 -5.56% 249,541 204,191 166,415 134,797 -18.56% 726,214 686,378 647,940 609,065 -5.7% 734,524 716,482 705,504 695,882 -1.79% 44,466 42,605 40,611 38,506 -4.68% 957,515 1,003,478 1,045,449 1,081,519 3.09% 392,315 396,109 401,223 407,407 .95% 302,511 332,711 358,592 380,639 5.91% 244,193 248,955 253,849 258,431 1.43% 18,496 25,703 31,785 35,042 17.32% 2,712,260 2,653,134 2,605,919 2,559,769 552,870 534,422 519,981 509,218 288,025 257,570 236,087 219,425 105,269 116,897 124,492 132,038 158,322 158,697 158,086 156,367 1,254 1,258 1,316 1,388 1,824,532 1,657,190 1,530,039 1,433,265

-1.44% -2.04% -6.57% 5.83% -0.31% 2.57% -5.86%

283,100

257,582

236,975

219,202

-6.19%

400,198

368,182

342,409

321,864

-5.30%

1,139,900 1,030,067

949,297

890,850

-5.98%

1358 71,354

1349 72,993

4.44% 0.36%

1134 71,956

1359 73,761

*From IDC Data from Q4/2015 HCP tracker

2016 BEQI Introduction & How-to-Use Guide Copyright 2016, Business Technology Association, All rights reserved.

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2016 BEQI | Geographical Definitions

Geographical Definitions •

State: The District of Columbia is treated as the statistical equivalent of a state for BEQI.

•

Metropolitan Statistical Area: A Metropolitan Statistical Area (MSA) is a relatively freestanding metropolitan area; is not closely associated with other metro areas and is typically surrounded by non-metropolitan counties. The title of an MSA contains the name of its largest central city, and up to two additional places that meet specified levels of population, employment and commuting. Generally, a city with a population of 250,000 or more is in the title. In cases like Los Angeles, where Orange County is sometimes treated as a part of Greater Los Angeles and sometimes treated as a freestanding metropolitan area, separate BEQI MSAs are defined for the individual urban areas that form huge urban regions.

•

County: A county is a major political and administrative subdivision of a state. In Louisiana, such divisions are called parishes. In Alaska, 23 boroughs and “Census Areas” are treated as county equivalents for census purposes. Several cities (Baltimore, Maryland; St. Louis, Missouri; Carson City, Nevada; and 41 Virginia cities) are independent of any county organization and thereby constitute primary divisions of their states and are treated the same as counties in census tabulations.

•

ZIP Code: ZIP codes primarily identify areas within the United States to simplify and speed the distribution of mail. Although data based on ZIP codes may be used for geographic and demographic purposes, the data should be used with caution, since ZIP code alignments do not necessarily conform to boundaries of cities, counties, states or other jurisdictions.

2016 BEQI Introduction & How-to-Use Guide Copyright 2016, Business Technology Association, All rights reserved.

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2016 BEQI | How to Use BEQI

How to Use BEQI Typically, dealers have a number of questions they need to address to manage operations. These include: •

If I want to expand into a new area, which area offers the best potential for new sales?

•

Should I adjust sales and revenue expectations up or down for the remainder of this year? Do I need to adjust staffing?

•

What quotas should I assign to my sales team?

•

Can I improve sales performance by moving a storefront location?

•

If I’m using direct mail, can I improve targeting and reduce my costs?

The BEQI can be used to address all of these questions, and more. In all of the following examples, refer to the provided Sample Data spreadsheet. Measuring Market Potential Each BEQI number indicates a geographical area’s potential for equipment sales as a percentage of the total United States potential for that kind of equipment as reported by IDC (see page 9). For example, the state summary for Montana shows a 2016 BEQI for total multifunction devices to be .002274 and IDC reports a forecasted 2,653,134 product placements for both color and monochrome MFPs combined in 2016. •

Formula to measure market potential: BEQI x IDC# = # of Units .002274 x 2,653,134 = 6,033.23 units

•

This should be interpreted as the state of Montana has the potential to consume 6,033 of the nation’s multifunction devices in 2016.

2016 BEQI Introduction & How-to-Use Guide Copyright 2016, Business Technology Association, All rights reserved.

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2016 BEQI | How to Use BEQI

Please note that: •

BEQI numbers CAN be added together when defining regions (the New England BEQI = sum of the 6 New England state BEQIs or you can add and subtract counties (and ZIP codes) to the MSA total if you want to define geography differently from the counties listed within the MSA).

•

They CANNOT be added together across equipment types (total BEQI for MFPs does not equal the sum of the three speed classes).

•

To estimate total sales for a given area, simply multiply the BEQI index by the appropriate IDC forecast of unit sales for the business equipment in question.

Evaluating/Assigning Territories To have an efficient and successful sales force — and, more specifically, efficient and successful salespeople — it is of utmost importance to assign equitable territories. Because the BEQI was developed specifically for the office technology industry, it is the ideal source for the information you need to establish sales boundaries with reasonable accuracy. Ideally, all territories should have approximately the same potential for sales. In defining the boundaries, you need to know the number of salespeople you have who will be covering the assigned area, along with the area’s BEQI figures. For example, say you are a dealer selling multifunction devices in Delaware and that you have four salespeople covering the state. STEP 1: Determine the total market potential for multifunction devices in Delaware market. There are two ways to do this. •

First, you can look at the BEQI State spreadsheet. Despite its small size, Delaware has a BEQI of .004045 for 2016.

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2016 BEQI | How to Use BEQI

•

However, for more granular detail, you can look at the County or ZIP Code spreadsheet. Delaware has three counties. The counties and the BEQI for each are shown below:

County KENT NEW CASTLE SUSSEX Total

2016 0.00025311 0.00347331 0.00031831 0.00404474

.004045 x 2,653,134 IDC# = 10,731.93 units STEP 2: Divide the BEQI by the number of salespeople: .004045/4 = .00101. Each salesperson’s territory should have an approximate BEQI of .00101 or 2,679 units (.00101 x 2,653,134 IDC#). In practice, salespeople working in the Wilmington area have ready access to parts of the Philadelphia metro area and southern New Jersey. One may want to include counties from those areas to define the greater sales territory before moving to Step 3. STEP 3: Assign territories by clusters of ZIP codes whose BEQI indices sum to approximately .00101. Due to physical boundaries and other variables, it is not always possible to be precise. However, the effort should always be made to arrive at figures as close to the average as possible, thereby giving each person on your sales team equal opportunity to succeed.

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2016 BEQI | How to Use BEQI

Conversely, you might ask these question: How many salespeople do I need for this year? What can you expect in terms of sales? Should you be pleased with sales? Again, we are using the 2016 BEQI for Delaware as an example along with the IDC national volume numbers as shown on page 9. To calculate an “expected value” for sales for 2016, you would: 1. Look up the BEQI number for the product category or for total MFPs; 2. Look up the corresponding IDC number for total product placements; 3. Multiply these numbers to get a total sales volume for the state of Delaware; 4. Divide that number by the number of major competitors in the market. This produces an “expected sales” figure based on average sales performance. Using the 2016 BEQI for the state of Delaware and assuming five competitors in the market, this is: (BEQI x IDC#) / #competitors = expected sales (.004045 x 2,653,134) / 5 = 2,146 units per year. If your actual sales performance exceeds this, you have done well. If you are short, you need to look into a root cause analysis to determine what to fix.

2016 BEQI Introduction & How-to-Use Guide Copyright 2016, Business Technology Association, All rights reserved.

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2016 BEQI | How to Use BEQI

Setting Sales Quotas Whether you are a dealer or a manufacturer, your ability to set sales quotas equitably will greatly affect your salespeople's performance. Many salespeople/dealers have wondered how a quota was set and have assumed that it was randomly decided. The BEQI offers reasonably accurate statistical information and, if used judiciously with other relevant data, will satisfy your sales team member’s inquiries and drive them to peak performance. Sales quotas are generally based on either unit sales or dollar sales. Either is compatible with the BEQI. Example 1: XYZ Inc. wants to sell 30,000 multifunction devices in the United States and wants to calculate how many they should allot to the Philadelphia metropolitan area. •

STEP 1: Locate the 2016 multifunction device BEQI for the Philadelphia MSA, which is .0183191.

•

STEP 2: In order to assign a quota to the Philadelphia market, the total number of multifunction devices that are to be sold by XYZ (30,000) is multiplied by the BEQI (.0183191). Thus: 30,000 units X .0183191= 550 units (rounded to the nearest whole number from 549.57).

Example 2: ABC Office Systems in Houston, Texas, has a quota of 3,500 MFPs from XYZ Technology. The counties that ABC Office Systems covers are Fort Bend, Harris and Liberty. •

STEP 1: Add the BEQI’s of three counties covered by ABC Office Systems

FORT BEND 0.00119871

+

HARRIS 0.03014564

+

LIBERTY = 0.00008090

2016 BEQI Introduction & How-to-Use Guide Copyright 2016, Business Technology Association, All rights reserved.

0.03142524

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2016 BEQI | How to Use BEQI

•

STEP 2: To calculate each county's potential, take each county and divide by the total potential.

Fort Bend BEQI (.00119871) divided by ABC total BEQI (.03142524) = .038144 Harris BEQI (.03014564) divided by ABC total BEQI (.03142524) = .959281 Liberty BEQI (.00008090) divided by ABC total BEQI (.03142524) = .002574 •

STEP 3: To allot the 3,500 units among the counties in proportion to their potential, multiply the quota (3,500 units) by each county’s potential. Fort Bend Harris Liberty

.038144 X 3,500 = 134 units .959281 X 3500 = 3,221 units .002574 X 3,500 = 9 units

Measuring Sales Performance

The sales manager’s responsibilities include assessing the performance of his/her salespeople. Using the BEQI in conjunction with your actual sales figures can give you concise and objective information that will aid you in evaluating your sales team’s performance. Let’s say that ABC Office Systems in Houston wants to evaluate its monochrome MFP sales performance in 2015 for the three counties it serves. •

STEP 1: Same as the previous section, except use the 2015 BEQI for monochrome MFP printers for the three counties.

Fort Bend 0.00119774

+

Harris .03036787

+

Liberty Total .00007944 = 0.03164505

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2016 BEQI | How to Use BEQI

•

STEP 2: To calculate each counties potential, take each county and divide by the total potential.

Fort Bend BEQI (.00119774) divided by ABC total BEQI (.03164505) = .037849 Harris BEQI (.03036787) divided by ABC total BEQI (.03164505) = .959640 Liberty BEQI (.00007944) divided by ABC total BEQI (.03164505) = .002510 •

STEP 3: Total all actual sales by county to arrive at the actual monochrome MFP sales for the territory. Then multiply the county share by the total monochrome MFP machine sales for the territory. The resulting number (BEQI sales) represents the potential for sales for the given county based on ABC’s total actual monochrome MFP sales.

•

STEP 4: To arrive at the Performance Index — a number or percentage that indicates how much of an area’s potential has been reached in relation to the total sales — divide each county’s actual sales by its BEQI sales (calculated in Step 3). Hypothetically: Actual Sales ($50,000) = Performance Index (0.54 or 54%) BEQI Sales ($92,480)

Allocating Advertising Dollars

Advertising is critical to equipment sales and using advertising dollars effectively is important. Because the BEQI measures an area’s potential purchasing power for business equipment, it is an ideal source of information to advertising departments or agencies wanting to develop effective campaigns for business equipment.

2016 BEQI Introduction & How-to-Use Guide Copyright 2016, Business Technology Association, All rights reserved.

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2016 BEQI | How to Use BEQI

For example, ACZ Advertising Agency represents a client that manufactures MFPs and is planning to focus its $1 million in advertising in three Midwestern states (Kansas, Missouri and Nebraska) for 2017. •

•

STEP 1: Add total MFP machine 2017 BEQIs for all three states Kansas

+

Missouri

+

Nebraska

.009995

+

.019247

+

.007355

= Total BEQI = .036597

STEP 2: Divide each state BEQI by the total BEQI for the Midwestern states and you will find the most efficient distribution of the advertising dollars as follows:

Kansas = .2731 or 27.3% of the $1 million in advertising budget Missouri = .5259 or 52.6% of the $1 million in advertising budget Nebraska = .2009 or 20.1% of the $1 million in advertising budget

This example raises the point that this data should not be used without thought. Since Kansas and Missouri share a major metropolitan area (Kansas City, which crosses state boundaries), one may have to refine these percentages based on the available media and pricing.

Selecting Test Markets

One of the BEQI’s most valuable uses is in selecting test markets. Because the BEQI gives the potential for business equipment sales by state, metro and county, it offers manufacturers and vendors the highest probability for successful test marketing. Once again, since the BEQI is based on the potential for businesses to purchase equipment, it is easier to select markets with a high potential for sales, thereby improving your chances for success.

2016 BEQI Introduction & How-to-Use Guide Copyright 2016, Business Technology Association, All rights reserved.

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